6/20/2008 @ 5:40PM

Vacationing On Loyalty

Soaring gas prices, rising food costs and a shaky economy are forcing many consumers to scale back their summer vacation plans. However, many of us don’t realize we may be sitting on an easily accessible source of vacation funding.

According to Points.com the average American is a member of 13 customer loyalty programs, mostly through various credit cards. These loyalty or “rewards” programs offer frequent users discounts and free gifts on a wide range of purchases, from airline tickets to hotels and restaurants, groceries and gasoline. Rewards typically come in the form of points, miles or dollars.

Navigating the confusing world of loyalty programs can be daunting, especially when trying to land last-minute vacation deals. Also, those who go the loyalty route need to be mindful of service and processing fees that can add up if you’re not careful.

Still, most of us have miles or points we aren’t taking full advantage of, and it’s never a good idea to “sit” on you miles. As the economy sinks deeper into the current downturn, there is always the chance that airlines and other reward grantors will begin to cut back or change their offers. The good news is that the credit card business is still very profitable, and fierce competition for your “loyalty” means there are great deals to be had, if you know where to look.

One way to organize all of your rewards programs is by using an aggregation service, like MilePort, a downloadable aggregator that tracks your frequent flier program and other online loyalty-program account information. Or Points.com, which allows users to barter their miles and points. The Toronto-based site partnered with several airlines, hotel groups and retailers to manage loyalty programs and to operate an exchange for customers to trade points and miles.

Here’s how it works. Say you have a million Delta SkyMiles but what you really need are hotel points for a quick, local getaway. Points.com can facilitate the deal that would help you trade some of your Delta miles for the points you need for the trip.

A liquid market for rewards points is helpful for consumers, but notably, some airlines with the largest loyalty programs are missing from Points.com, including United Airlines and
Continental Airlines
. Also, take heed: The airlines determine the “exchange rate” between their reward programs, and this often does not work to the flier’s advantage. To be fair, Points.com warns that, in general, swaps across different industries (for example, swapping airline award miles for retailer points) tend to be more favorable. So if you use a rewards aggregator to plan a vacation, you might consider swapping air miles for hotel points or even Amtrak points.

Frequent Flier Specials

As airfares rise, fliers are increasingly cashing in. According to Continental Airlines, for example, passengers collected 1.5 million free travel rewards in 2007, and since this time last year, redemption awards are already up 20%. Meanwhile, American Airlines and American Eagle awarded 2.6 million free travel rewards in 2007.

You are best positioned for a good flight deal if you’ve been accumulating miles through one single airline. If that’s the case, your first step should be to visit the airline’s Web site and investigate current deals. Keep in mind that the key to getting the most value for your miles when planning a last-minute vacation is flexibility.

Continental Airlines, for instance, advises members to consider traveling on non-peak days (Tuesdays and Thursdays) and times (early morning or late evening in most markets) for a better chance at securing a last minute reward ticket. American Airlines uses color-coded calendars to show available dates for redeeming AAdvantage award tickets over a four-week period.

Also, check for airline partnerships that allow for easy mile transfers. The SkyTeam Airline Alliance, for instance, is a partnership of 11 airlines, including Continental, Delta and
Northwest Airlines
. Star Alliance, which includes Air Canada and United Airlines, has over 20 airline partners. With 10 members, Oneworld includes American Airlines and British Airways. If you’ve accrued miles with any airline in these alliances, check the different deals their partners are offering for the best last-minute value.

If you’re low on miles, you can still use the little you have accrued for some savings this summer. Certain airlines, such as Northwest with its new PerkChoice program, recently started allowing frequent fliers to obtain tickets with miles for one-half of a round trip and cash for the other.

And beware the small print, common among frequent flier programs. Depending on how last minute you are in booking your flight, you might be slapped with a fee. American Airlines charges up to $100. Also, make sure to book your ticket online to avoid a processing fee for award tickets booked over the phone.

Credit Card Loyalty

Finally, don’t overlook benefits your credit card might provide–the biggest one is getting paid in points or dollars whenever you spend money shopping. And let’s face it, we’re spending a lot more these days just on bare necessities.

It’s a smart idea to use “cash back” rewards offered by popular cards such as Discover,
American Express
or the HSBC Platinum MasterCard. A fair number of cards now offer rebates on gas, quite a perk nowadays with gasoline up 50% from last year, according to the U.S. Bureau of Labor Statistics. The Discover gas card awards cardholders with 5% cash back when they fill up.

Other cards excel at the grocery store, another key benefit, considering the cost of bread is up by 15% in the past year, according to the latest Consumer Price Index, and eggs are up by 18%. Ben Woolsey at Creditcards.com suggests Citi Diamond Preferred Rewards Card or Citi Dividend Platinum Select Card, which both give 5% cash back on supermarket purchases for six months.

Turning credit card points directly into miles is also a good move. Some cards, such as the Capital One Miles Card, claim to have no blackout dates or seat restrictions. American Express Membership Rewards offers a 1-to-1 ratio exchange rate of points for miles with some airlines, including American and Continental. American Express also allows members to get advances on points, which can be redeemed for full vacation packages or at restaurants and special events, such as concerts, though the points must be earned back within 12 months.

So there is hope, whether you’re looking to finagle some free food, gas or even a trip somewhere this summer. As a loyal consumer, you spend enough throughout the year; now is the perfect time to collect.